Indeed, Fed Chair Jerome Powell said it was likely to take longer than previously expected for US central bank officials to gain the “greater confidence” needed for them to kick off interest rate cuts.
“Inflation is still too high,” he said in a press conference after the end of the Federal Open Market Committee’s two-day policy meeting. “Further progress in bringing it down is not assured and the path forward is uncertain.”
“It is likely that gaining greater confidence will take longer than previously expected.”
Nevertheless, Powell said he still expects inflation to ease over the course of this year. “That’s my forecast,” he said. “I think my confidence in that is lower than it was because of the data that we’ve seen.”
US stock and bond prices turned higher as Powell spoke, with investors embracing a view that the central bank chief was not as “hawkish” as had been feared in the wake of a run of disappointing inflation data on inflation in recent months.
Powell’s remarks to reporters proved “notably less hawkish than many feared, lining up behind the FOMC statement rather than whipsawing the market,” said analysts at Evercore ISI. For Powell, “the basic message was that cuts have been delayed, not derailed.”
Investors in contracts tied to the Fed’s policy rate drove up prices, betting more strongly on prospects that rate cuts could begin in September rather than later in the year as reflected in earlier market pricing.
